Don Mariano Santos Avenue, San Isidro, Angono, Rizal Z CONCRETE AGGREGATES CORPORATION [my Tel. No.: 651-3211 to 15 Telefax No.: 451-0192 April 16, 2007 THE PHILIPPINE STOCK EXCHANGE, INC. 4/F Philippine Stock Exchange Center Exchange Road, Ortigas Center Pasig City, Metro Manila Attention: Atty. Pete M. Malabanan Head, Disclosure Department Gentlemen: In compliance with Philippine Stock Exchanges’ Rules on Disclosure, please find attached hereto a copy of the Annual Report for the year 2006 (SEC Form 17-A), which we filed at the Securities and Exchange Commission today, April 16, 2007. ‘Thank you and best regards. Very truly yours, MICHAEL DAVID I. ABUNDO III Corpofate Information OfficerCOVER SHEET (s[s]1]4[o ‘SEG Regisiaion Number ‘Ceanbanys Fal Ware) pol) [malrlilalwlol [s ajy|riols [alvje|nulel.| | sla[n) |i [s|tlo[rol,| [aln[efolnfo|,| [Rt ]zfale I Botiass Baatces No Sol Gy Toa Prawns} —— MICHAEL DAVID |. ABUNDO I [ 6311231 Conia Feiner : ‘Capany Telephone Nambar a2] [3[4) of] [2 Way Tony fica Year - : ‘Tes Meth s[elc| [Fol Rim al LI ~ FORM TYPE Seconitery Lesnsa Type WARDIESBIS ‘apt Rogoing this Doe ‘Anvanded Aces NoriborSeaion Total Amount af Borowings irae ee ae he SESS HS oreo | T 1 1 rhniad oi ae STAMPS: Remarks = 2 black ink for scanning purposes:PSE Security Code ‘SEC Number _36740 File Number CONCRETE AGGREGATES CORPORATION (Compan, DON MARIANO SANTOS AVENUE, BARRIO SAN ISIDRO, ANGONO, RIZAL (Company's Address) 651-32-11 to 15 / 451-11-02 fax no.: 651-3211 to 15, (Company's Telephone Number) DECEMBER 31 (Fiseal Year Ending) (Month & Day) SEC FORM 17-A (Year 2006) (FORM TYPE) (Amendment Designation if Applicable) Period Ended Date (Secondary License Type, if any)Republic of the Philippines) Pasig City )ss. SECRETARY'S CERTIFICATE I, MICHAEL DAVID I, ABUNDO III, of legal age, Filipino, with office address at 9" Floor, Ortigas Building, Ortigas Avenue, Pasig City, after having been duly sivorn in accordance with lavi, do hereby state and certity that: 1. __ Lam the duly-elected and qualified Assistant Corporate Secretary of CONCRETE AGGREGATES CORPORATION (the "Corporation’), a domestic corporation duly organized ancl existing under anc by virtue of Philippine laws, with business address et Oon Mariano Santos ‘Avente, Brgy. San Isidro, Angono, Rizal. 2. __As Assistant Corporete Secretary, 1 caused the preparation of the Corporation's SEC Form 17-A, Annual Report for Year 2006 for filing with the Securities and Exchange ‘Commission (SEC) anc the Philippine Stock xchange (PSE). 3. _In compliance with the Policy on Electronic Release of SEC Forms, together with the required hardcopies of the SEC Form 17-A Annual Report for year 2006, we are to file a diskette containing the said SEC Form 17-A in the prescribed format, 4, This Is to certity that the hard copies of the SEC Form 17-A Annual Report for ‘Year 2005 and the diskette have exactly identical contents as far as all the basic and material data and information are concerned, 5. This Certification is Issued for the purpose of attesting to the truth of the foregoing and for whatever legal purpose it may serve, IN WITNESS WHEREOF, I have hereunto set my hand this ___day of at Pasig City. race Orn PR Te” SUBSCRIBED AND SWORN to before me this day of affient exhibiting to me his Community Tax Certificate No. 18165691 issued on February 02, 2007 at Pasig City. Doe. No. 8S Page No. ei ea y esa fury anata DANILG 8 TAVAB Rr uni ete as 2007 AL: PTR NO. 3665302: 0//16) 116/06) AULA A 6/06 ZAR IOP NO. Ea TAOALA o1/0 ea A SSSECURITIES AND EXCHANGE COMMISSION SEC FORM 17 ~A, As Amenced ‘ANNUAL REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE [AND SECTION 141 OF THE CORPORATION CODE 1. For the fiscal year ended 2006 2, SEC Identification Number 36140 3, BIR Tay Identification No. 4, Exact name of registrant as specified in its charter CONCRETE AGGREGATES: CORPORATION 5, Philippines. 6. (SEC Use Only) Province, Country or other jurisdiction of Industry Classification Cade; Incorporation or organization 7, Don Mariano Santos Avenue, Barrio San Isidro, Angono, Rizal 1930 ‘Address of principal office Per Amended Articles of Incorporation approved Postal Code by the SEC on December 2, 1999 8, (02) 651-32-11 to 15 z -01-92 Registrants telephone number, Including area code 9, No. 70 Industria St., Bagumbayan, Quezon City Former adores 10, Securities registered pursuant to Sactions 4 and 8 of the RSA Title of Each Class Number of Shares of Common Stock ‘Outstanding and Amount of Debt Outstanding Common Shares 27,456,449 11. Are any oF al of these securities listed on the Philippine Stock Exchange? Yes (x) No() 12, Check whether the registrant: has fled ail reports required to be filed by Section 11 of the Revised Securities Act (RSA) and RSA Rule 11/2) ~ 1 thereunder and Sections 26 and 141 of The Corporation Code of the Philippines during the preceding 12 months (or for such shorter periad that the registrant was required to file such reports); Yes(«) —No() has been subject to such filing requirements for the 90 days. yes(x) -No( )PART 1 — BUSINESS AND GENERAL INFORMATION BUSINESS 1. Business Development From the time i vies organized in 1959 2s CONCRETE AGGREGATES, INC, the company has supplied the construction industry with quality processed aggregates, ready mis Concrete, bituminous concrete mix and pre-stressed/pre-cast concrete for over four decades, A merger with BUILD-ON AGGREGATES CORPORATION in 1973 gave rise to @ new entity, CONCRETE AGGREGATES CORPORATION (CAC) with a quarrying operation in Angono, Rizal, a source of the best aggregates for the construction industry. In 1978, Ortigas & Compary, Limited Partnership (OCLP) took over the management of CAC with the purchase of the controling interest. The direction of the company was then geared towards the acquisition of additional equipment and installation of new plants to enhance service facillies. A prestiessed/precast plant was set up In 1980 and a Construction Services Division was formed in 1982. Ramrod Blocks was purchased in 1980 and was eventually renamed CAC Power Blocks, Stressworld, which is situated in Antipolo City, was acquired In 1989 and a Ready Mix Concrete (RMC) lant was installed to complement the prestressed/precast plant. By 1995, in order to keep in step with the demands of the industry, significant efforts were made to beef up CAC's resources. Towards the end of the year, purchases of vital equipment, machineries end capital expenditures (Ike setting up of satelite plants in strategic locations and various improvements in plant facilties) were done. This was necessary in the light of the massive development expected in the long term, Jn the succeeding years, the equipment and facities of CAC came to a total of two AMC plants, thrce Bituminous Concrete Mix (BCM) plants, four Agaregates quarry/cushing plants and three prestressed/precast concrete plants. These proviced Jobs and opportunities, to many employees. However, the economic crisis that hit the country in 1998 was tough on CAC’s business. Financial forecasts which perceived 2 steady path towards ecanomic boom burst with the currency turmoil and debilitating high interest rates that have prevailed for the past several years. Amidst this precarious scenario, CAC took a calculated stance, whereby sales were limited ta controlabie levels, The volume of transactions drepoed and this cut profiradlity, but receivables were maintained at 2 safe level. Moreover, the continuing slump in the ‘construction and real estate industry which occurred at tha end of 1997 has impelled the company to adopt cost-shortening actions, cutback polices, short and medium term objective re-evaluations and other fiscal measures to ensure stablity and endurance. “The wersening economic crisis had inevitably slowed down the construction industry ‘and continued to bleed the company. This compelied the compeny to take drastic business decisions eri measures. Despite efforts to reduce operational costs anc maintain viability of operations during these difficult times, these efforts remained insufficient to sustain the company's present workforce, After a seties of careful ceiberations and considerations, the Board of Directors of CAG, in an emergency meeting held on September 14, 1999, at which a quorum was present, unanimously passed and apnraved the resolution authorizing the company to undertake, due to heavy financial ses, the total and complete dosure of the Engineering and Construction Division, composed of the following: RMC, BCM, Concrete Products Group and Construction;without prejudice to any existing contracts and commitments and the reerganization and restructuring cf the remaining divisions to conform with the level of efficiency necessary to maintain the company's viebilty end survival Thus, to dete, mining is the sole focus of business of the company. Due to this development, efforts are being made to continualy upgrade, enhance and further make productive and profitable the mining operations, in order to maintain the vigbilty and survival Of the company. In a nutshel, business development for the last three (3) years devolved and focused on the propar maintenance, repair and rehabiftation of the company’s four (4) ctusting plants for more efficent production actwites at the optimum level possible, where breakdowa/downtime will be minimized if not totally eliminated; retooling to increase production hours; development of the quarry area to ensure avalabilty of materials or reserves for continuous processing by the crushing plants for the producton of aggregates and its by-products. Special attention was given to intensify and pursue aggressive marketing campaigns, with the company attaining 150 certification to ensure quality of products and services and customer satisfaction. Environmental enhancement and protection were Hkewise meticulously advocated to ensure smooth and continuous operations, For 2006, n ackition to continuing its efforts in the adove-dsasssed areas, the company algo intensFied ts research and development activities with the goal of introducing new products to the market, {A significant event in the history of the company was the execution of a Management Agreement between the company end OCLP. In a regular meeting of the Board of Directers held on Aucust 30, 2005, the Board of Directors of the company approved the execution of a Management Aarcement with OCLP, Pursuant to the requirements of Article 44 of the Corporation Code, the company called a Special Stockholders’ Meeting on January 24, 2006 for the purpose of approving the proposed Management Agreement. On that date, all the proposed terms and conditions of the Management Agreement were approved unanimously by the stockholders present, representing more than 92% oF the company's cutstanding capital stock. Thus, in 2006, the implementation of the terms and conditions of the Management Agreement bagan in earnest. A more detailed discussion on the execution of the Management Agrezment is civen below, 2. Business of Issuer Principal Products AC's aggregates plants ~ the source of the company’s quality aggregates — are nestled at the foot Of the mountains in the outskirts of Barrio San Isidro, Angoro, Rizal. Optimum workability is guaranteed because only wel-graded aggregates, spedifcally, Crushed and processed basalt rocks, are passed on to customers. The centralized in-pit Crushing facilities are copable of feecing crushed materials to four plants and the combined ‘output OF these plants reach approximately 6,500 cubic meters per cay. Rigid quailty control plays @ hand in every aspect of the Angono operations. Aggregates are carefully screenad to ‘secure the desired specifications, and are thoroughly washed to remove any traces of organic impurities, which can affect and reduce the strenath of concrete. Available aggregates sizes are 34, 3/8, G-i, and S-1, which mact the standards set by the Department of Public Works and Htahways (DWH) and the American Socety for Testings and Materials (ASTM), CAC follows the guidelines set by the government to halp ensure adequate supply of aggregates, While maintaining the best balance between socal, environmental anc economic considerations. The quarry site located at Barrio San Isidro, Angono, Rizal incurred an amount of 'P7,795,679.00 in compliance with the environmental laws in year 2006. Bureau of Mines regulations have been complied with religiously, as CAC Invests more on ervironmental protection.‘The Company’s name and logo have been duly registered with the Bureau of Domestic Trade. Likewise, existing governmental regulations have no significant effect on the business es any orders/directives issued were manageable. ‘The following table shows the company's principal products cistributed or sold to customers within a one hundred (100) kilometer radius from the principal business site, the corresponding volume sold, and its contribution to sales or revenues as follows [Products Volume 7% Sales % | “Aggregate 12(G-1) 141,354 13.34% | 033,155,562 11.139 Agaregate 3/4 484309 45.73% 162,877,380, 54.67% Aggregate 3/8 | 134612 | 12.719 33,382,548 | 11.20% Coarse sand (51) 213867 | 20.19% 51,933,879 17.27% Base coarse — A 75,905 TAT% 16,324,426, 5.48%. Sub-base coarse 1,029 0.10% 163,588. 0.05%. Boulders 1,785, D.17%. 228,592 0.08% Composite materials 6,361 0.60% (352,693 0.12% TOTAL 1,059,292 100,00% 297,938,669 100,00% Distribution Methods of Products, “The products of the company are distributed two ways: (1) explant cr pick-up by ‘austomers of the products from the plant site in Angono, Rizal, and (2) by delivery by CAC's ‘contracted haulers to the customers’ project site. Foreign Sales Set forth below is a summary of the export sales of the company in the last three (3) years: These sales represent a very minor portion of the total sales volume and revenue of the company for the period. Volume (eum) | Peso Value Year Customer & Customer's Area 2004 | No Export Sales - - ‘005 | Daewoo Engineering & Construcion Corporation = Palau | 12,157.23 | B9,701,469.55 Anderson Pavement Corporation - Marshall Islands. 2,580,479.77, ‘Anderson Pavement Inc. - Marshall Islands 1 9,624,550.35, 2006 [Daewoo Engineering & Construction Corporation = Palau | 12,897.62 7,942,974.36 lycarp Intemational ~ Palau 12,664.64 | 8/518,922.77 New Product or Service For the year 2005, the company has stepped up its research and develooment activities which were gaared towards developing new products that may de introcuced in the market. Aggragates Industry CAC belongs to a sector falling under the mining industry that produces aggregates stones from quarries, ether from mountain rocks or river stones, ‘The company supplies aggregates for use in the production of ready-mix concrate and asphalt products,Aggregates are a major component of concrete, and are used in the mixing of asphalt in road construction. Ready-mix concrete and asphalt are extensively used in the Corstruction of buildings, roads, and other infrastructure projects. Geographic Area ‘The market for the companys product is pnnapally the National Capital Region and Regions 3 and 4. A fractional but significantly growing portion of the company’s sales goes to significant infrastructure projects in other regions and the export market. Competition There are approximately 19 to 15 competitive quarry operators within the National Capital Region, However, only about 5 of these are the major operators that give CAC significant competition. Some of the notable competitors are Pacific Concrete Aggregates, Blue Rock, Oxford Aggregates Corporation, Rapid City Aggregates, and Hard Rock Aggregates, Majority of the company’s main competitors do not possess adequate mining and quarrying assets and therefore are not seen as serious anid long-term threats, Principal Methods of Competition ‘The following are employed by CAC as methods of compatition, to wit: maintenance of product performance conforming to accepted standards, volume discounts, crecit extensions, comprehensive marketing and promotions activities, and giving technical assistance and support to customers. CAC Strength CAC quarries basalt rock and produces quality aggregates known in the construction Industry for their strength, consistency and durability, The products pass the ricid local and Intemational standards. CAC is ISO 9001 certified, the only aggregates company that bears this distinction. CAC also draw competitive advantage from its proxmity to the markets which It serves, @ team of competent and committed professionals and technical knowledge drawn from 48 years of experience. Civil construction in the greater Metro Manila area favors the company because ofits proximity to their constructon stes and better avaliabity of aggregates. Also, beng fist in the quarrying and rock aggregates process, ts competitive ericing and rock quality gives tt a very distinct advantage. Major Business Risks Rick management involves identifcation, assessment and mitigation of risks that threaten the companys corporate oblectves. Risk Management is a regular management accountability and is a key performance measure to manage crises; comply with good corporate governance standards, minimize business uncertainty, and exploit opportunites, ‘Among the meny risks that an ordinary going concem faces, the following have been identified 2s major business rises based on the impact of the event, action or inacticn thereto 6would have on the company, to wit 1, Agena crushing piants, the breakdown of which may lead to cowntime and lessen procuction days. Availabilty of plant, spare parts sourced from ourside the country, Haulers’ or truckers’ inefficiency. Availabilty of the extraction contractor’s heavy equipment for the extraction process. Sourcing and evaiiabllity of explosives. Compliance with environmental requirements under CACs Environmental Compliance Certificate (ECC), its Environmental Protection and Enhancement Program (EPEP), et. Compliance with listing disclosure requirements. Availabilty of developed quarry areas for extraction of materials. Customers’ satisfection issues. oysen YPN For purposes of risk identification and management, major risks are defined as critical events but, with proper management monitoring, can be endured by the company. CAC does its risk management by going through the following processes: 1, The identification of risks Is undertaken by each department of the company. 2. An analysis Is made as to how and why the identified risks may impact on the campary, based on severity or level of gravity of the event and the likelinood of the event happening, using a provided risk matrix. 3, Mitigation measures are formulated to address the risk. 4, The effectivity of the mitigation measures is manitared. 5. Arreport is than made on how the risk was handled and how the company fared. Suppliers ‘The company is the owner of the land where it conducts quarrying activities, and sources the materials for production, The nature of the business of the company is such that the materials produced are the rave materials used in the construction activities both by the pubic and private sectors. Thus, CAC Is not dependent on any supplier for raw materials. However, the spare parts, lubricants, power end technical service requirements of the ‘Company are supplied by the folionring major suppliers, to Wi + Gusher parts: @ Process Machinery Company, Inc, © Sandvik Tamrock, Ine, Scan Pacific Process Equpment 2 Jean Trading & Generel Merchandise + Woven Wire Screens and Conveyor Belts © Wesirac Industrial Corporation Deslate Steal Weaving Synchvomesh Asia, Tokai Rubber Products ‘Tomerson Phils. Com. Royal Jade Machinery Phils. * Vibrating Bearings for Screens, Crusher and Motors: 9 Bearing Center Machinery, Inc. > Universal Bearing Cop, 2 Wincorp Ent,, Inc. + Fabricator of internal and External Main Parts of Crushing Plants: > M.S. Machinery & Metal Fabricator > Exec Engineering Works > Universal Automotive Machine Shop 2 Solar Venture Builders & Machinery+ Nachining, Fabrication ang Casting Jobs: © Grand’ Engineering & Foundry Corporation 2 Tiger Machinery & industrial Corgoration + Hareware and Construction Materais for Maintenance or Repairs: > Marsian International Sales, © Clarkson Industriel Supply © Excelsior General Merctandising + Diesel and Special Lubrication for Crushing Plants Caltex Philippines, Inc. + Light and Heavy Equipment Spare Parts: Achievers Sales Corporation Pacific Parts Corporation © Johnco Commercial Glernwoed Commercial, Inc © Capital Industries, Inc. + Conveyor Rollers, Frames, and Fabrication Jobs © Cathay Industral Sales © Tokai Rubber Products 9 NTPI International, Inc Electrluty 0° Power: > Manila Electric Company Contracts Management Agreement Jn a regular meeting held on August 30, 2008, the Board of Directors of the company approved the execution of a Management Agreement with OCLP. ‘The Menagement Agreement calls for the general management of and overall supervision of the affars and business operations of the company, such as but not limited to te following: strategc planning; domestic and international sales; marketing and distribution; real property management and. development; accounting; finance, employee care and human resources development; information technology end information systems, aud and business process systems and controls; legal; and administrative services, including, without limtation, to advisory and consulting services in relation to the supervision of independent auditors; the sdlection, retention and supervision of external legal counsel; the selection, retention and supervision of Investment bankers or other fiiancal advisors and such other consultants es OCLP may deem necessary in the conduct of its role as General Managers of CAC, The term of the Agreement is five (5) years commencing on November 1, 2005 and ending cn October 31, 2010, Pursuant to the requirements of arte 44 of the Corporation Code, the comgariy called a Special Stockhotdere’ Meeting on January 24, 2006 for the purpose of approving the proposed Management Agreement. On that cate, ai the proposed terms ard conditions of the Management Agreement were approved unenimausly by the stockholders present, representing more than 92% of the company’s outstanding capital stock. The favorable vote ‘obtained was more than the 2/3 requirement of the law in cases of management contracts such as the subject contract. Pursuant to the Menagemient Agreement, managerial personnel of OCLP were seconded to the compeny to perform the obligations end undertakings stipulated in the Agreemert. In particular, CCLP manager personnel began taking over management of several key departments such as farce, legal, information systems end information technology, and human resources during the year 2006.‘Transaction with and/or dependence on related parties In terms of rranagement, the company Is dependent on the managers seconded by OCLP pursuant to the Management Agreement ente’ed into by the company with OCLP (see discussion above). Customer Dependence CAC has almost (200) customers, where some have existing credit fines in accordance with the company’s poliaes. Thus, CAC 1S not at all dependent on any singe customer for continued operations, Permits to Operate CAC'S property in Barangay San Isidro, Angono, Rizal is legitimately owed and covered by a number of Transfer Certificates Tite (TCT), corresponding to an agaregate area of 214 hectares. Quarrying is allowed by virtue of two Mineral Production sharing [Agreements (MPSAs) entered into with the government, particularly: MPSA No, 032-95-1V and MPSA No. 055-96-1V. MPSA No, 032-95-IV, which has an effectivity date of June 15, 1995 and amended in January 15, 1996, authorizing mining actives on thee (3) mining claims, namely Basalt 1, Basalt 2 and Basalt 3 for 25 years from effectivity. This MPSA covers an area of 192 hectares MPSA No. 055-96-1V has an effectivity date of November 15, 1996 and warrents mining in the mining claim Basalt 8 for the next 25 years therefrom. This MPSA covers an area of 19,99 hectares. Quarrying operations have already covered 3 total of $0.25 hectares since it began the early 1970's up to the present. The company’s quarrying operations now cover areas under the Gasait 1 and Basalt 2 mining claims. Present quarrying operations in Basalt 2 is further permitted under present law by a Certification from the Department of Environment and Natural Resources (DENR) fssuex! int January 1994, Being an operating mine prior to 1962, the company’s current operations in Basalt 2 are exempted from the Environmental Impact Assessment System (EIA System) required by present laws in an application for an Environmental Compliance Certificate (ECC), Jn 1995, anticipating an increase in production without necessarily restructuring the existing plants, an ECC application was submitted to request permission to expand quarrying ‘operations in Basalt 8 Thereafter, an ECC (ECC-715-RI-302-95) was granted to CAC by the DENR in January 1996. Anticipating higher demand in the succeeding years, the company ‘embarked on a plant re-tocling program in the Year 2000 to sustain the projected increase in production, and therefore was required to undergo the EIA System. The proceedings then resulted in the issuance of a consolidated ECC issued in December 2002. As for CACS EPEP, the same was likewise approved and is presenty being implemented. Research and Development Research and development activities of CAC comprise actual technical studies on quarry design, plant performance, production and maintenance, retooling projects, water, noise ard ir sampling, flooding and sedimentation of the river, studies on quarry slopes, stability and benches, environmental impact of actvities, quary engineering, resource modeling and geological modeling made by professional and reputable entities; technical audits, condesions based on scientific experimentatiors and observations; actual on the Jobtraining and seminars and other activities done to ersure continuous process and systems improvement and enhancement of manpower skills and knowledge. Compared to the company’s revenues, the amount spent on research and development was 3.89% for the year 2002, 14% for the year 2003, 5.58% for the year 2004 and 4.25% for year 2005 for an aggregate sum of 46.0 milion’ For the year 2006, the Company spent 0.28% or about #820,000.00 basically intenced for the proposed Talaia, Binangonen and Angoro properties projects. As stated earlier, the company increased ts research and development on new products that may be introduced in the market. Work Force Pursuant to its aim of achieving economy of operations, improved compatitivaness and long term viability, the company implemented a reorganization and restructuring plan which affected a total of seventy three (73) employees. The separation from the company of the affected employees took etfact on March 2006. By the end of the year, the company had a total of 134 personnel, 84 of which were on regular status ard tre remaining 50 were either contractual or employees of independent sarvice contractors. Of the 8¢ regular employees, 12 belong to the Finance, 20 pertorm other sales ane marketing as well as other support functions and 52 belong to the Operations Department. About 50% of the regular work force for 2006 are members of the Union. In the middle of 2006, the company alse held and concluded negetiations with the Union over Certain economic provisions of the Collective Bargaining Agreement (CBA). The next round of discussions between Management and the Union is scheduled on May 2007, CBA benefits consist of Medical/Dental Care, Hospitalization Assistance, Funeral Assistance, Clothing Allowance/Work Gadgets, Rice Subsidy, Calamity Assistance, Birthday Leave, 30 days VL/SL,. which are also accorded even to those who are rot members of the Union Labor Strikes The company was a recipient of one notice of strike in the past five years. On September 11, 2001, a Notice of Stnke was given, arising from the deadlock in the negotiation for higher salary rate and separation/retrement rates. The dispute ended! with the execution of a Memorandum of Agreement affirming the efficacy of the existing CBA anc agreeing to a declaration of a moretorium pertaining to the proposed increase in salary anc separation rates, Community Relations ~ Safety, Health and Social Concerns ‘The company understands and responds to vormunity concerns and it works under the following principles which: (1) places 3 broad interpretation on the environment and the community; (2) Fstens to community concerns; and (3) acknowledges the various needs of ‘special interest groups. The company and the community implement various develooment programs hand-in-hand end in accordance with the agreed schedule and manner of implementation indicated in the approved Social Development and Management Program (SDMP) of the ‘company which was aporoved on December 15, 2003 by the Mines and Geosciences Bureau (MGB). Some of the company’s major accomplishments pertaining to community-based development programs implemented in year 2006 ace 2s follows: 10Sidewalk Construction along Dan Mariano Santos Avenue (DOMSA) - the objective of the project is to ensure the safety and heaith of the residents of the community along DOMSA, by providing @ concrete pedestrian patinvay or walkway. The total length accomplished was 1.6 kiometars exceeding the target by 60% as stated in the Annual SOMP far year 2006, B. Medical Mission - the company provided free medical assistance far identified underprivileged residents of Angano, Rigel. About 250 patients were dagnosed and treated last June 30, 2006 and this was made possible in cooperation with the Philippine Mecical Practitioners Association which provided the services of doctors free of charge. Other accomplishments ~ the company supported different community-related, government and non-government organizations’ initiated activties. such as, (OBRA Art Exhibit, 1° World Art Experience and even sponsored students to the Regional Pilot Schoo! for the Arts. CAC believes that community development programs produce continual and collective benefits for the company, the community and the environment. Environmental Programs Environment protection is a significant priority of the company and! it applies high standards of environmental management to its operation. This is best exemplified by the company's siltation contro! measures, reforestation, In-house monitoring of water and air ‘ality, solid and hazardous waste management, slope and backfiling areas’ stability maintenance and progressive rehabilitation projects. It demonstrates how ervircrnental safeguards can be introduced to mining to make them acceptable to local communities, “The company has likewise manifested its commitment to environmental compliance when it received very salisfectory ratings in the audits conducted by the Mult-partite Monitoring Team which monitors the environmental soundness of the operations. “The compeny also received the Safest Quarry Operation Award for year 2006 given by the Philippine Mine Safety and Environment Assodation in coorinabon with the Department of Erivironment end Natural Resources & Mines and Geosciences Bureau. Th adulition, the company was also shortlisted in the Presidential Mineral Industry Environmental Award — a feat that placed the company among the ranks of the industry's elte in environmental management. The report below represents the various expenditures incurred by the company In line with its commitment to stengthen and further develop commurity relations and environmental management programs, to wit: Safety, Health, Environmental and Social Costs Description 2006 2005 2004 Repair & maintenance 3,583,024 FI,593,608 Fi, 146,302 Equipment rentals ‘869,070 459,910 17,000 Salaties, wages and benefits 4,924,767 2,123,245 2,150,197 Consuitarts,, legal & other fees 383,214 373,655 140,000 Representation & Entertainment 236,775 172,406. 178,835 Security services 215,200 1,283,536 1,183,214 Fas, oil & lubricants 125,041 98,881 311.482 Office Supplies 86,025 56,637 75,131 Donations & other contributions 83,272 168,164 356,704Seedlings 72,010 3,850 Depreciation 56,231 58,577 90,127 Taxes, Fees & Licenses 50,625 71,138 0,906 Transportation & Traveling 37,985 10,033 12.619 Membership dues 24,000 24,500 22.295 Insurance & bonds 13,081 10,437 10,964 Telephone, postage & courier 13,028 15,099 2611 Miscellaneous expenses 25,331 37/136 25,0: TOTAL 8,795,679 P65 554,672 _ 95,813,390 The above-stated expenses incurred by the Safety, Health, Environment and Socal department ~ the company’s ambassador of goodwill to the community, environment ang people — basically covered the following environmental programs and community-based projects namely’ 1. Siltation control activities ~ invelve desiting of setting ponds to provide dearer recycled water for aggregates processing; the desing and heuling of benilk from sand traps; and the maintenance of haul roads, Reforestation ~ indudes the maintenance of planted trees, grass cutting, weeding and replacement of dead trees; the maintenance of nursery and the newly set-up plantation at quarry southwall. Water quality measures ~ the maintenance of efficient waste water system to prevent river contamination and to promote proper utilization of waste water. 4, Slope stability maintenance ~ the obsarvance/adoption of systematic quarrying method ana standard open pit mining practioes. 5, Air quality mezsures — acherence to third party aucit on air quality and quarterly air sompling measures. 6. Backilling area stablity maintenance ~ relates to the maintenanos of the pit bottam/rehabiltation area for the containment of overburden materials. 7. Safety and housekeeping — inclades maintenance /refiling of fire extinguishers; issuance of personal protective equipments such as hard hats, safety shoes, rain coats, ear muffs, eye goggles, welding masks and gloves, etc; installation and repairs of safety signs; plant housekeeping and training cn safety programs. 8. Progressive rehablitation ~ the progressve rehatiltation pian is included ih the company’s approved EPEP. This is being undertaken at the pit bottom ard the average backtling ic 27,000 cubic meters per month. It ikewise involves shaping and dozing of dumpste. ©. Community development assistance projects ~ incudes sidewalc constructions, ‘medical missions, sponsorshios, dorations of consivuction materials for bacfiling ‘and other community-based infrastructure projects and other donations to the underpriviegec residents of Angono, Rizal. “These Various activities manifest the company’s commitment to ensure the safely of all workers and thet all goverment mandated environmental laws are being implemented for the common good of the greater community. Ih tum, the company has always been an advocate of the best practced environmental management and its components echo the falowing features:= An environmental culture where both environmental excellence and business excellence are twin goals; = Accontinual urge to develop and improve environmental management systems and performance, including training and awareness; ‘A.group of people working together sharing 2 common goal; = Alucid understanding of environmental impacts and responsibilities; ~ A positive attitude where the environment is seen as providing an opportunity rather than a threat PROPERTIES ‘The present center of CAC’s main activity of mining is located at Barangay San Isidro, ‘Angono, Rizal. The company’s batching plants located at Quezon City and San Fernando, Pampanga were sold in 2000. Some of the company’s properties are currently mortgaged including several properties located in Longos, which were mortgaged with the Bank of Phitppine Istands for @ #200 mnilion revolving promissory note Ine of which F117 million was, availed as of December 31, 2006, These facilities consist of sales and administrative offices, warehouse, quarrying and manufacturing faaiities. ‘The principal plants for aggregates located at CAC’s quarry site in Angono, Rizal are all due for upgrading and if finences woud accommodate, they are up for complete rehabilitation oF replacement in order to improve production at more efficent rates. These plants are atleast thirty Years 0X. Ukewsse, transportation and rating ecuipment, machinery, office furniture, fixtures and tools and implements are old and if depreciation is taken into Consideration, the aforecteg pants are valued almost at zero. Other properties of the Eempany incloce parcels of land located at Anger, Riza, Cebu City, Batanges, Cardona and Binagonen, Rial anc Pampanca. These landhokngs were inkaly earmarked for Fvestrent and for future quarry sites. Since the company owns the property where the quarry site and all crushing plants and its related equipment and spare parts are located, thare is no need to lease any other real estate property, plant and other equipment. The company has no plans to acquire any other properties for the next twelve (12) months. The following table lists the ind vidual parcels ef land whose titles are in the name of Concrete Aggregates Corporation: TcTWe. | Location Use Tens ® Restriction _& : TET_Na RT | Quezon Gy | Former office None “These properties 52017 (039978) | compound are subjectte the N= | Quaion Gly Former office | None fallowing mound restriction: Ne | Queen Gy | Former office | None Pursue to Sec.7 compound of Republic Act No 1] GuaronGiy | Former offte | None 26 (RA No. 26") ‘compound this certificate of | Former office | None ‘title, having been compou administratively, Former office | None ~ | reconstituted, is compound without prejudice Former office None ey Siysund vahose right or Former office | None iterate | s2019 (237983) compound "TCT No. _N-| Quezon Gty | Former office | None rated on the[216373 compound | T original herecFat FCT No, N+ | Quazon City | Former office | Serves a5 collateral | the time it was lost 216374 compound | for the P200,000.00 | or destroyed. TCT No, Ne | Quezon Gity | Former office | Revolving Promissory 216375, compound | Note with the Bank Tet No, N- | Quezon City | Former office | of the Philippine 216376 compound —_ Islands | TCT No. Ne | Quezon Gity | Former office 216368 ‘compound | TET No. We | Quezon City [Former office | 216369 _ - compound | RT-107470 | Quezon City | Former office compound | REIOPATT | Quezon Gity | Former office | _} compound = TCT Wo. 60469 _| Tallsay, Cebu | ice None TCT No, T- | Talisay, Cebu | Idle None | 67490 - | Ter No, | Sto, Tomas, | None | None 61014 Batangas - 7 Ct No, 1} Sto. Tomas, | Wane None 11928 Batangas | cr No. | San ae Wone j fione 134950-R Fernando, Pampanga = ocr No. | San ide None fione 177339-R Ferrando, | Pampanga Pee ebe er No. | Floridablanca | Idle None None 448320-R Pampanga oe TCT No. Ne) Markina Cty | tle @) Entry No. None 21616 192705/7-70873- | MORTGAGE in favor ‘of the RCBC for the j ‘sum of Eight Hundred Fity | Thousand pesos | (Pp 850,000.00) ) Entry No. 80051/T-N-21846- MORTGAGE nn favor of the REBC for the sum of Four Hundred Sixty Five Thousand | Pesos (Php 465,000.00) | cp Enty No. | 62332/T-N-21846- MORTGAGE in favor af the ROBC for the sum of One Hundred Eighty Five Thousand Pesos (Php 185,000.00)ay Ente No (249413/T-N-21846- | MORTGAGE in favor of the ACBC for the sum of Fie Hundred | | Thousand Pesos | (Pho $00,000.00) Torento, | Condominium | None ‘one | Pasig | space Oranbo, ‘Condominium | None None Posig space | Granta, [Cordon [Nore ‘ane Pasig ‘space — — Oranto, | Cordominium | Nene None Pasig Space = ‘Oranto, | Condominium | None None Pasig | ‘oranto, Tone Pasia a Oranbo, None Pasig Space | ‘ranto, | Condominium Won Pasig space = ‘Angono, Rizal | Quarry ste None ingono, Rizal | Quarry ste TET No. 647853 | Angono, Rizal | Quarry ste TCT No. 647855 | Angono, Rizal | Quarry site [FICK No. 647854 | Angono, Rizal | Quarry site ETT No. 628301 | Angono, Rizal | Quarry site "TCT No. 567470 | Angono, Rizal | Quarry site [ICE No. 567168 | Angono, Rizal | Quarry ste TEE No. 567167 | Angoro, Rizal | Quarry ste ‘498505 | Angono, Rizal | Quarry site 498506 | Angoro, Rizal | Quarry site 498507 | Angono, Rizal | Quarry site 498508 | Angono, Rizal | Quarry site| . 495637 | Angono, Rizal | Quarty ste 495636 | Angono, Rizal | Quarry site “TET-No. 495929 | Angono, Rizal | Quarry site "TET No. 567169 | Angono, Rizal | Quarry site TET No. M- | Binangonan, | Raw land 99733 | Rizal TCT No. M- | Binangonan, | Raw land None None 99734 Rizal TCT No. | Carcone, | Raw land None None 6510 Rizal ‘TET No, Me | Binangonan, | Raw land None | None | 99732 Rizal LEGAL PROCEEDINGS In September 2005, two separate Apalicatons for Exemption were fled by the company with the DAR-CLUPPI and the MARO respectively in order to have severai properties ‘of the company formally exempted from the coverage of Republic Act No. 6657. 1s‘Other than the applications for exemption, the compery has no other material ending legal proceeding other than labor related cases and overdue account collection tases. Theie was no proceeding that was terminated during the fourth quarter of the fiscal year covered by this report. Submission of Matters to a Vote of Security Holders, Management Agreement ‘On August 30, 2005, the company’s Board of Directors approved the execution of a Management Agreement with OCLP (soe discussion above). Pursuant to the requirements of Article 44 of the Corporation Code, 2 Speaai Stockholders’ Meeting wes held on January 24, 2006 for the purpose of approving the proposed Management Agreement. On that date, ‘all the proposed terms: and conditions of the Management Agreement were approved unanimously by the stockholders present, representing more than 92% of the company’s outstanding capital stock. Amendment of Corporate By-Laws In the regular meeting of the Board of Directors of CAC held on November 3, 2005, the Board approved the amendment of the Corporate By-Laws to create the office of Executive Vice President (EVP), The rationale for the creation of this office is to ensure that the principles of good corporate governance wii be effectively applied for investor conficence, public trust and maintaining a profitable business. The following are the duties and responsibilities of EVP: exercise general supervision over the other officers and employees of the corporation; execute contracts on behalf of the corporation provided the Board retains the power to delegate this authority to other officers of the corporation as it deams necessary and convenient; sign, endorse and deliver checks, drafts, bis of exchange, promissory notes, and order of payment end sums of money alone or in conjunction with ‘such other officers as the Board may designate; submit such reports to the Board and the: stockholders as the Board may request; and to exeicise such other powers, functions and duties es the Board may delegate. In pursuit of the requirements of the law on the matter of amendment, this matter was presented for approval by the stockholders in a Special Stockholders’ Meeting held on January 24, 2006. The stockholders present thereat, comprisng more than 92% of the ‘outstanding capital stock, unanimously approved the said amendment to the corporate By- Laws to create the position of an EVP. No ather matter requiring the vote of the security holders was submitted by the company for the last querter of year 2006, Market for Issuer's Common Equity and Related Stockholders Matters Dividends For the years 2004, 2005 and 2006, no dividends, cash or otherwise, were given by the company to its stockholders. ‘The By-Laws of the company expressly stipulate that the Board of Directors may declare dividerds only from the surplus profts of the Corporation at such time or times and in such percentage as the Board of Directors may deem proper. No dividends shall be declared ‘that will impait the capital of the company. (Article VII, Section 1),MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 1n year 2006, the company experienced a marainal drop of 6% or F20.21 milion and 11 oF P36.35 milion, respectively, from year 2005 and 2004 revenues, Despite the goed news on fiscal anc macroeconomic fronts particularly the strorg peso and the bulish stock market, year 2005 barely resulted in major infrastructure development projects. The construction of the New Tilo Airport was the only major project where the company supplied aggregates of 106,733 cubic meters while sales to major customers such as Dee Concrete Ire, (69,929 cubic meters) and Premiere Ready Mx (86,538 cubic meters) were basicaly intended for batching plant requirements for private construction. ‘The fall in sales volume by 74,233 cubic meters or 7% from 2005 levels was rartialy softened by export sales which were sold at higher prices, Export sales increased In peso value by 112% of P13.80 milion and in volume by 159% or 26,511 cubic meters, fespectively, as compared to year 2005. 2006 net loss after tax amounting to P33.55 millon iS a reduction of 252% or #55.60 ‘milion and 238% or P57.95 millon in profitabilty compared to years 2005 and 2004 net income, respectively. Aside from the drop in sales, several factors that supstantially resulted to the net loss registered by the company in year 2006 include the folowing: ‘The reorganization/restructuring in January 2006 which affected a total of seventy four (74) employees; redundancy costs as a result of which amounted to 14.98 milion, ‘The additional provision for inventory obsolescence amounting to 98.02 milion ‘The additional allowance fer bad debts provided during the year amounting to 8.14 millon, 4. The increase in operating expenses particularly on professianal/management fees and other services aimed to turnaround the comparyy’s operating results while assuring long term profitability and growth, 5. The increase in extraction costs and product transfers/handling rates per unit and the additional mobile production equiament rentals. 6. The wrte-off of Net Operating Loss Carryover (NOLCO) and minimum Corporate income tax of 16.68 milion, On the other hand, the Company had 2 one one-time gein on sale of a property Cebu City in year 2004, while there was no similar ransaction accounted for In years 2005 and 2006, Forecast for year 2007 “The company’s sales and net income Is forecasted 10 increase sigrificantly in 2007. Additions). ma government infrastructure projects which includes, ameng others, the Manila-Cavite Coastal Road and the Northrall Projects, will commence aside from the ongoing South Luzon Expressway project which started belatedly during the last quarter of 2006. Also, growth in private construction is seen during the year 2S demand for housing units fueled by OFW remittances ard office spaces catering to business process outsourcing ‘companies will continu to rise. With’ stronger sales and marking team through the completion of tts manpower complement in 2006, the company is set fo introcuce adutioral products derived from its mined aggregates into the market. It also aims to further improve and expand its export sales in 2007.‘Aside from the surge in demand from both public and private constructions, the company also expects geins from selling Its various properties located at San Fernando, Pampanga; Telisay, Cebu; and Binangoran, Rizal FINANCIAL HIGHLIGHTS Presented below are the major financial highights of the attached audited financial statements of the company for the years 2004, 2005, and 2006, all ending December 31, to (En tition pesos, except ratios and per share amounts) 136.20] 235.20 (95.00) - — = - General & Administrative Expenses | (106.11) 0.35) [Seting Expenses (28.09) (26.98) lincome (Loss) before Tax (2470) 26, 49.15 INet Income (Loss) After Tax (3.55) 2205! Eamings (Loss) Per Shere (2222) 0.803) 0.888) 2006 PERFORMANCE Sales Sales for year 2006 is @ drop of 6% or 20.21 milion and 11% of P36.35 milion from year 2005 ard 2004 revenues, respectively. The absence of major road projects and the ‘marginal demand for private and pubic construction dunng the year contributed to the drop Ih sales. The construction of the New Iloilo Airport was the only major project where the ‘Company supplied aggregates of 106,733 cubic meters while sales to major customers such as Dec Concrete Inc. (89,929 cubic meters) and Premicre Ready Mix (86,538 cubic meters) Were basically intended for batching plant requirements for private construction, The fall in seles voume by 74,333 cubic meters or 7% from 2005 levels was partially softened by export sales which were sold at higher orices. Exort sales increased in peso value by 112% or P23.80 millon and in volume by 158% oF 26,511 cubic meters, respectively, as compared to year 2005. Cost of Sales Cost of sales increased by 79% or P12.95 millon in year 2008 3s compared to year 2005. However, year 2005 cost of sales registered a favorable decrease of 1% or PI.O2 million 2s compared to year 2004. 2006 aggregate production costs is lover (from P199.40 million in year 2004 and P196.08 milion in year 2005) due to lower production volume resulting from reduced sales demand; and the lesser personnel costs as a consequence of the redundency program at the start of the year. However, extraction costs and product transfers/handiing rate per unit wasincreased during the year after a series of negotiations with the contractor. Also, mobile production equipment rentals increased from 81.98 milion in year 2004 to 5.27 millon anc PLL.27 milion in yeers 2605 and 2006, respectively General and Administrative Expenses General and administrative expenses increased by 29% or P23.97 million and by 18% of P16,39 million as compared to years 2005 and 2004, respactively. This is due largely to the redundancy costs cf £14.98 milion; management fee recognized in year 2006 to OCLP amounting to P9.0 milion; the extensive training programs implemented during the year amounting to 900,000.00; and the adsitional provision made for inventory obsolescence ‘amounting to F8.02 millon Selling Expenses Selling Expenses marginally decreased by 12% or P2.36 milkon as compared to year 2005. The decrease is due consderably to the drop in sales which also reduced sales loading, tansfers and handling charges. Meanwhile, selling expenses registered an unfavorable increase of 3% or B475,000.00 as compared to year 2004. Interest and Other Financing Charges Interest and other finanong charges went down favorably by 31% or 4.15 milion ‘and 439% or 7.03 milion as compared to years 2005 and 2004, respectively. In year 2006, despite oF the P9.0 million increase on short term loans, the company managed to lower its interest rates from 9.5% to 7.2% as opposed to that of 12% to 8.5% IN year 2005, Meanwhile, the decrease in short term loans from P140.0 milkon in year 2004 to PL08.0 million in year 2005 accounts for the 43% favorable decrease in interest and other financing charges. Interest Income Interest Income decreased by 11% or P58,000.09 and by 58% or P669,000.00 compared to years 2005 and 2004, respectively. Any excess operating cash is used to settle interest-bearing loans instead of investing it on short-ierm instruments. Gain on Sale of Investment Properties In 2004, the company sold a parcel of land located in Cebu with a cost of #3.22 milton for ®25.74 million, net of selling expenses, ard resulted to e gain of P22.52 million. ‘There was ro Smilar transaction in years 2005 and 2006. Others — net Other income (net) decreased by 16% or P1.66 milion and 35% or 24.82 milion as compared to years 2005 and 2004, respectively. The decrease is basicaly due to the dedine in sales of scrap materials and other idle assets. However, in 2006, hauling income Was higher by #5,40 milion and 5.26 million as compared to 2905 and 2004, respectively. 0Cash Cash decreased by 50% oF £16.30 millon from P32.66 milion in 2005 to 916.36 million in 2006. This is basically due to marginal inflow of collections from past due teceables as opposed to the company’s improved orocessing and releasing of payments to its contractors, vencors ard suppliers based on the agreed credit terms. In adéiton, any excess operating cash is used to settle interest-bearing loans instead of investing it on short term instruments. Receivables Recelvables (net of allowance for doubtful accounts) declined by 9% or P4.0 millon {rom P44.53 millon in year 2005 to this yoar’s balance of P40.53 milion. The decine was brought about by the decrease in sales from year 2004 to yeer 2006 and the additional allowance for doubtful accounts provided during the year amounting to ®8.14 milion. Inventories Ending invonteries (finished goods, spare parts and supplies) in 2006 amounting to 19,21 million decreased by 46% oF P16.13 million as compared to year 2005 balance of 35.34 million, This was due largely to lower production volume in year 2008 associated with the three-month quarry holiday from January 2005 to March 2006. Since the compary then had sufficient valume of boulders, extraction was put to a hal to avert a possible unhealthy inventory build up. Secondly, since inventories are valued at lower of cost and net realizable value, spare parts and supplies inventories, an additional °8.02 million allowance for Inventory obsolescence was made, Other Current Assets Other current assets (net) increased by 158% oF 4.48 milion due largely to increased input VAT rate on purchases of spare parts, supplies, services and equipments from 10% in year 2005 to 12% in year 2006. Also, input VAT on services substantially ineased since most of the company’s mejor ectivities in year 2006, particularly in production operations, were faciitated by various contractors as compared to the in-house services carried out in previous years. Investment Properties Investment properties consisting of land, land improvements and building decreased bby 3% of 22.81 milton, This was basicaly due to the annual deprecation expense charged to investment prapecties in year 2006. Property, Plant and Equipment - net Property, plant and equipment (net) increased by 7% oF ®LL.60 million from the year 2005 balance of #164.60 milion to P176.20 millon in 2006. Increase was due largely to the acquisiticns/additions in year 200 amounting to F655 milion for development cost, 3.04 milion for pant ste improvements, 25.85 milion for machinery end equipment, 7.16 milion for transportation and rolling equipment, 84.07 milion for furniture and fixtures, and lastly 113,000.00 for tools and implements. However, charges for depreciation amounting to P15.28 milion leveled off the accounted acquisttions/additions in year 2006,Deferred Income Tax Assets - net Deferred income tax assets (net) decreased by 10% oF P6.66 million; from its year 2005 kalance of P65.76 milion, it went down to P5888 milion. This was due largely to the expiration of Net NOLCO incurred during the year amounting to 44.05 milion equivalent to a tax benefit of P15.42 million es compared to the P483,000.00 tax benefit arising from year 2006 NOLCO of P1.38 milion. Short Term Bank Loans Short term bank loans increased by 8% or F9.0 milion from a total of #108.0 milion in year 2005 to P117.0 milion in year 2006. Again, the company’s availment of loans was largely attributable to the marginal cash flows internally generated particularly on collections. from past due accounts receivable as opposed to the improved processing end releasing of payments to contractors, vendors and suppliers based on agreed credit terms. Trade Accounts Payable “Trade accounts payable marginally increased by 14% or 83.54 million due largely to the ngher payables (0 contractors for extraction and equipment renta's arrounting to #108 millon and around @1.44 million payable to various suppliers and! vendors, Accrued Expenses ‘Accrued expenses and other accounts payable dacreased by 25% or 18,49 milion, from ®74.21 millon in year 2005, it went down to 55.72 milin in year 2006 due to the improved processing and releasing of payments to contractors, vendors and suppliers based on agreed credit terms. Ths balance also includes payroll relatec expenses, cutsourced services, mining related costs, among others. Stockholders’ Equity Stockholders’ Equity decreased by 15% or 635.51 milion from the year 2005 balance of 242.53 milion to the year 2006 emount of 207.03 milion, The decrease was basically attributable to the P33.55 million net loss accounted for in year 2006 compared to the R22.05 millon 2nd P2440. milion net income posted in years 2005 and 2004, respectively Restatements had been made in the financial statements prior to 2006 arising primarily from the change in the amortization metnod for quary development casts and additional allowarce for doubiful accounts, The effects of these changes are Fully described in Notes 2 and 25 of the attached 2006 Aucited Financial Statements. A) Key Performance Indicators Total Sales Volume —_— Effect to Gross Profit and to Net Income/NNat Profit. = Reparted on a periodic basis: daily, monthly and annually. Average Selling Price ~ Effect to Gross Proft and to Net Income/Net Profit. = Computed basad on the Total Sales Value divided by the Total Sales Volume. Total Production Volume — Sigrificant etfect in product unit cost. ~ Reported on 2 periodic basis: daily, monthiy and annually.8) vi vi vi Extraction Cost ~ Effect in Production Cost. ~ Repacted on a monthly basis. Freight and handling — Eifect in product Cast. ~ Incurred for delivered sales, Full Fiscal Years Due to the company’s sound financial condition, there are no foreseeable trends, events Or uncertainties that may have a material impact on its long term or short term liquicity. ‘There ere no events that will trigger direct or contingent financial obligation that Is ‘material to the company, including any default or acceleration of an obligation, ‘There are no off-balance sheet transactions, arrangements, obligations. (Inducing contingent obligations), and other relationships of the company with unconsolidated entities or other persons created during the reporting period Funding will be eourced from internally-generated cash flow, and also from borrowings or available credit fadities from other local and Intemational commercial banks. ‘At the moment, there are yet no material commitments for capital expenditures other than those performed in the ordinary course of trade or business, ‘At the moment, the management (s curtentiy monitoring its production volume capacity ‘a5 there is an increasing demand for aggregates usually during the summer season. In ‘addition, some of the government projects that were started belatedly in 2006 like the ‘South Luzon Expressway Rehabilitation will be in full blast in 2007. ‘The causes for any material changes in the financial statements from 2004 to 2006 are ‘explained in the Management Discussion and Analysis, as well as in the accompanying notes to Financial Statements. “There Is no Known significant element of income or loss that dd not arise from the ‘company’s continuing operations, except 2s disclosed above and In the attached audited financial statements. Accounts that registered material changes of 5% or more and the causes thereof are as follows: Increase Accounts 2006 2005 5 Remarks Sales 3297/938,869 | P318,144,003 | (20,205,334) | Sales decreased duc tothe | absence of major infrastructure development projects and the marginal demand for private and public construction in year 2006. | Tefen sles was arti eed by ent oes | Seer nes, ee SS Cost of sales | 196,500,703 | 185,600,733 | 12,959,970 | Baraction costs and procuct transfers/h ing rate per unit“and mobile equipment rentals - |. turing the year. General and | (06,740,902) | (82,768,107) | 73,972,795 | General and administrative admin ‘expenses increased due largely expenses to the redundancy costs; OCLF management fees, extensive training programs; and addtional provison made for — inventory obsolexcence. Seling (47,458,058) | (19.813,370) | @355 312) | Seling expenses marginally expenses decreased due tothe drop in sales which also reduced sales loading, vansfers and handling | __ te charges. 44,531,190 | (996,282) | The decine in receivables & brought about by the decrease in sales and the adcttonal allowance for doubt ‘accounts provided during the pop | yr. inventories | 19,213,781 | 35,344,555 | (16,130,774) | inventories (niched goods, | spare parts and supokes) ecreased due fargely to lower production volume associated with tie three-month quarry tlgay from January 2006 to March 2006, Receivables 40,534, | Secondly, spare parts and ‘supplies inventories were | provided with acktional allowance for inventory | ‘obsolescence. jTavestment | ~ 78572,267 | 1,592,865 | (2.B10,596) | Investment properties Properties ecreased due to the annual | epreciaton. Property, 176,199,872 | 164/599,458 | 11,600,414 | Property, plant end equipment plant & (net) increased due ta the equipment ~ 2cquistions/adidtions leveled | et off by depreciation charges. Deferred 58,800,058 | 65,763,507 | (6BA3,408) | Deferred income tax assets income tax (net) decreased due largely to assets — net the eypration of NOLCO. ‘Short term | 117,000,000 | 108,000,000, 5,000,000 | Short term bank loans bank loans incraased due to the marginal cash fions internally generated by the company as compared ‘tp the improved processing and releasing of payments to contractors, venders ard suppliers based on agreed credit terms. Trade 28,729,661 | 25,100,353 |__ 3,539,298 | Trade accounts peyable accounts marginally increased due to payable higher payable to contractors Tor extraction and equipment rentals and various supplers 8ang vendors. Tsrued SEVIGIS| UBIO? (16495254) Acruce expenes decreed expenses due to proved processing of | payments in accordance wth crecit terms. ‘Stockholders | 207,027,228 |” 242,533,887 | (35,506,659) | Stockholder’s Equity decreased “Equity due to the 2006 net loss. PART II - OPERATIONAL AND FINANCIAL INFORMATION MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ‘There ere 629 stockholders of record of the company. The top 20 stackholders of the ‘company as of December 31, 2006 (a8 attested by the company’s stock transfer agent) are as folows: 2 stockholder 1 Oigne B Co, Ld Partnership 21 007594 2. Ramon, Rodriguez 309.939 3. Fancco Ortigas Secures, Ine “2217 4. Edumide Onis 513409) 5. mata Views arando ss29i2 | 6, Remedi ¥. Mrondo Ortigas - $52,709 TL HSBC aia [a Sagtro, te. magi | [8B Herings Corp ign 206,351 10, The Roman Catholic AMbshop of Mona 783495 0.20 11, reo £ Wat 38,905 [02 12 Franco Orugas Secures, Ine, NC#33189 58,240 sg2i0| 0.21 13, Francisco Onigas it 53,085 53005) 0.19, 14, Juan C, Buenviole $8,778 43778] 0.18, 15, Cala D. Laurel Zi67 27767] 0.10 16. Luisa D. Laeson 26,708 26701] 0.10) ; ] ine | NCS. ____ | _assan assu| 0091 58 liSeng Gap A Sons, re | __19,008 s08[ 0.07, 1, Ma, Vetala Origas [28,659 sggs9 | 007 20. Remedios O. Luzuriaga T 18,859 18,859 0.07. | ‘Others 0 ii] ss0701 | 128, Total sor | 3ies78 | 378668 ‘A. The Philipsine Stock Exchange (PSE) Is the principal market where CAC’s common equity is traded, Par value of both Cass “A” and Class "S" shares is tagged at P10.00 each. For the years 2004, 2005 and 2006, the following are the quarterly high and fon sales prices for CAC Class A sharest f 2008 3005 3006 ee eeeT = Z = gz | = = =| 6.00 7.00 | 7.00 | 7.00 ga f= t= | 609 | : ‘CAC Class B shares have rot been traded since its Isting date, B, Recent Sales of Unregistered Securities For the last five (5) years, no sale of unregistered securities has been conducted by the company. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCTAL DISCLOSURES: S\Clp Gorres Velayo & Co, (SGV) was the company’s independent auditor for the: fiscal year ending December 31, 2006 in lieu of Laya Mananghaya (KPMG) whose five (5) ‘years of aucit engegement which ended after the completion of the audit of the company for the 2005 fiscal year, For the year 2006, there were no disagreements relabng to accounting prinaples, practices and financial discdosures with 2006. Financial statements prior to 2006 have been restated in 2006, the detals of which are fully described in Notes 2 and 25 of the attached 2006 audited financial statements External Audit Fees CO 2006 2005 (@) ‘The aggregaie fees, net of VAT, billed for 500,000.00 | 330,000.00 professional services rendered by SGV in year 2006 BR by KPMG in year 2005 for: 1, The audit of the company's annual finandal statements for the years ended December 31, 2006 and December 31, 2005. 2. Other assurance and related services rendered by SGV In year 2006 & by KPMG in year 2005 that are reasonably related to the performance of the audit of the company’s franca statements, (©) Tex Fees The aggregate fees, net of VAT, piled for 350,000.00] 150,000.00 professionel services rendered by SGV for tax accounting, compliance, advice, planning and any | other form of tax services. . © _Ni Other Fees 427500 | 74,601.25 ‘The aggregate fees, net of VAT, biled for products and services provided by SGV in year 2006 & by KPMG in year 2005, other than the services reported under items (2) and (b) above, The nature of which indudes out of pocket expenses such as transportation, meals, postage, printing ‘and documentation,ia) Audit Committee's approval Paicies and Procedures The following are the Audit Committees policies and procedures with regard to the ‘company’s External Auditors (as enunciated in its Charter): The Audit Committze shail review and evaluat the effectiveness of the company’s processes for assessing significant risks or exposures and the steps management has faken to mnimize such nsks, “The Audit Committee shall consider and review the effectiveness of or weakmiesses in the company’s overall control environment, and any related significant findings and recommendations of the independent accountants, together with management's responses thereto. ‘The Audit Committee shall review the coordination Of the avxit effort to assure completeness of coverage of key business controls and risk aveas, raduction of redundant efforts, and the effective use of audit resources. ‘The Audit Committee shall discuss the status and adequacy of management information systems and other information technology. “The Audit Committee shall review flings with the SEC and other agencies, and other published documents containing the companys financial statements, and consider Whether the Information contained in these documents is consistent with the Information contained in the financial statements. ‘The Audit Committee shall recommend to the Board of Directors the External Avior to be nominated, approved. FINANCIAL STATEMENTS: Please see attached Consolidated Financia! Statements of Concrete Aggregates Corporation and Subsdiaries as of December 31, 2006 end for the year ended December 31, 2096 with comparative figures for 2005 and 2004 and Independent's Aucttors! Report. PART ILI-CONTROL AND COMPENSATION INFORMATION DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY Directors Ignacio R. Ortigas (Chairman of the Board) 56 years old Fino. Pogttions and offices held for the present and past five (5) years: Charman of the Bo2rd/Director, Concrete Aggregates Corporetion “Term of Office: June 2006 to June 2007 Period Served: June 2006 to present General Partner, Ortigas & Company, Limited Partnership Director, Itogon Suyee Mines inc. Director, Sacitro, Inc. Director, Igmar Holdings, inc. Director, Phittread Tire & Rubber Corporation Director, Columbian Carton Philippines, Inc.Francisco M4, Ortigas III (President) 62 years od Filipiro Posttions and offices held for the presert and past five (5) years: President/Director, Concrete Aggregates Corporation ‘Term of Office: June 2006 to June 2007 Poriod Served: June 2006 to the presert General Partner/ Treasurer: Ortigas & Company, Umited Partnership President & CEO, Rotary Golfing Foundation ofthe Phifppines Charman of the Board, Philam Bond Fund Inc. Charman of the Board, Pilam Strategic Growth Fund, Inc Charman of the Board, Philam Management Asset, Inc. Charman of the Board, Philam Fund, Ine. Charman of the Board, Bayer (Phils), Ine. Charman of the Board, Orca Expiosives, Inc Corporate Nominee/Director, Francisco Ortigas Secure, Inc Director/Treasurer, Phiippine Golf Foundation Director, Commonwealth Foods Corporation Director, 3, Romoro & Associates Director, Valle Verde: Country Cub Warner G.N. Manning (Vice President) 54 years od British National Posttions and offices held for the present and past five (5) years: Director/Vice President, Concrete Aggregates Corporation ‘Term of Office: June 2006 to June 2007 Period Served: June 2005 up to December 2006 CEO, Hongkong & Shanghai Banking Corporation Limite, Philippines CEO/Chairman, Hongkong & Shanghai Banking Corporation Linted, Brunei General Partner, Ortigas & Compeny, Ltd, Partnership Member, Brunel Exchange Committee ‘Member, APEC 2000 Summit Advisory Cound and Brunei Information Council Rex C, Drilon IT (Executive Vice-President) 60 years od Filipino Posttions and offices held for the present and past five (5) years: Director, Concrete Aggregates Corporation “Term of Office: une 2008 to June 2007 Period Served: June 2006 to the present. Chief Operating Officer, Ortigas & Company, Limited Partnership Vice-President, Ayala Land, inc. President, Cebu Ho'dings, Inc. Jose C, Rodriguez IV (Treasurer) 39 years od Positions and offices held for the present and past five (S) years: Ditector/Treasurer, Concrete Acaregates Corporation Term of Office: June 2006 to June 2007 Period Served: June 2005 to the present Vice-President, Goodah Foodhouse Corporation Managing Director, Rod Taylor Sports Co., Inc “Treasurer, Rod Taylor Sports Co., Inc.Ma. Vietoria 8. Ortigas (Corporate Secretary) 36 years old Filipino Positions and offices held for the present and past five (5) years: Director, Concrete Aggregates Corporation ‘Term of Office: June 2006 to June 2007 Period Served: June 2006 to the present Jaime M, Ortigas 62 years old Filipino. Positions and offices held for the present and past five (5) years: Director, Concrete Aggregates Corporation "Term of Office: June 2006 to June 2007 Period Served: June 2005 1992 to the present Managing Director, Frandsco Ortigas Seaurites, Inc. Director/Treasurer, Xaviera Holdings, Inc. Director/Treasurer, FOS! Realty, Inc Director/Treasurer, Susana Commercial Corporation Rafael B. Ortigas 35 years old Filipino. Positions and offices held for the present and past five (5) years Director, Concrete Aggregates Corporation ‘Teim of Office: June 2006 to June 2007 Petied Served: June 2006 to the present Alberto M, Montilla 71 years old Filpno Positions and offices held for the present and past five (5) years: Director, Concrete Aggregates Corporation ‘Term of Office: June 2006 to June 2007 Period Served: June 2006 to the present President, Itegon-Suyoc Mines Vice President/Secretary, Sagitro, Inc. Assistant General Manager, Creative Trade Center (Metal Menufacturng) Generosa P. Reyes (unt June 29, 2006) 41 years old Filipino Positions and offices held for the present and past five (5) years: Director, Concrete Aggregates Corporation ‘Farm of Office: June 2005 to June 2006 Petiod Served: June 2005 up to June 2006 \Vice President (Credit Risk Management), Hongkong & Shanghat Barking Corporation 8Roberto M, Paterno 71 years oid Filipino Positions and offices held for the present and past five (5) years’ Ditector, Concrete Aggregates Corporation “Term of Office: June 2006 to June 2007 Period Served: June 2006 to the present Chairman of the Board of Directors, Philippine Cancer Society Consultant, Manila Electric Company Director, MCO Foundation Senior Vice President for Administration, Manila Electric Company Director, Meralco Industrial Engineering Services Corporation Director, Software Breakthroughs, Inc. Director, Computer Information Systems, Inc. Samson C. Lazo 63 years od Filipina Pesitions and offices held for the present and past five (5) yearst Director, Concrete Aggregates Corporation Tetm of Office: June 2006 to June 2007 Period Served: June 2006 to the present President, Chief Operating Officer, EEI Corporation (up to 2005) ‘Commissioner, Construction Industry Arbitration Commission Board Member, Phitppine Overseas Construction Board Director, 1% Vice-President, Philippine Construction Association Chatman, Philippine Institute of Steel Construction (1997) ‘Member, Rotary Club of Pasg Independent Directors. ‘An independent director is a person other than an officer or employee of the registrant Corporation, its parent or subsidiaries, or any other individual having a relationship with the camoraticn, ‘which would interfere with the exercise of indepencent judgment in Carrying out the responsibilties of a director. Pursuant to Section 38 of the Securities Regulation Code Mr. Patarno and Mr. Lazo served as independent directors of the company, Significant Employees Joe! G, Laporga (connected with CAC until March 2006) 45 years old Filipino Positions and offices held for the present and past five (5) years: ‘Assistant Generel Manager, Concrete Aggregates Corporation Mine Planning anc Enginecring Dept. Head, Concrete Aggregates Comoration Consuitant, Nine Planning and Engineering Works, Phitex Mining Corporation Rolando R. Cruz 46 years old Filipino Positions and offices held for the present and past five (5) years:Acting General Manager, Concrete Aggregates Corporation Maneger, Mine Engineering, Talings Dams & Civil Construction, Philex Mining Corp. Senior Manager, Corporate Mine Engineering, Philex Mining Corporation Danilo L. Roa 50 years old Frlipino Positions and offices held for the present and past five (5) years: Finance Division Head, Concrete Ageregates Corporation ‘Administration Division Head, Concrete Aggregates Corporation ‘Audit Consultant, Concrete Aggregates Corperation Private Accounting Practice ‘Conaultent, Phiiplan M.A., Ine. (Planners & Management Advisors) Finance & Administrative Officer, Alabanza Associates Consultancy, Inc: Chief Accountant, The Light of Jesus Community Foundation, I Ma, Carmela C. Lajom (connected with CAC until March 2006) 36 years old Filipino Positions and offices held for the present and past five (5) years: Legal Counsel/Asst. Corporate Secretary, Concrete Aggregates Corporation Lagal Consultant, Concrete Aggregates Corporation Senior Associate, Belo Gozon Eime Law Offices Junior Associate, Andrew Lagmay & Associates Dolores N. Dollaga 50 years old Filipinc: Posttions and offices held for the present and past five (5) years: ‘Technical Auditor, Concrete Aggregates Corporetion Quality Management Representatve, Concrete Aggregates Corporation Management Consultant, Concrete Aggregates Corporation Alberto Felix C. Vitladeigado 47 years old Filipino Positions and offices held for the present ond gast five (S) years ‘ales and Marketing Manager, Concrete Aggregates Corporation Sales Manager, Phiimetal Products, Inc. Soles and Marketing Manager, CPAC-Monier Pils, Inc Assistant Vice-President ~ Marketing, First Lepanto Ceramic, Inc. Apolio L. Alinea 37 years old Filipino Positions and offices held for the present and past five (5) years: Human Resources Department O'ficer, Concrete Aggregates Corporation Humen Resources Department Officer, Forest Hills Goif and Country Gud 0Emmanuel A. Rapadas (seconded by virtue of the Management Agreement between OCLP and CAC) 47 years old Flizino Posttions and offices held for the present and past five (5) years! General Manager, Concrete Aggregates Corporetion Chief Financial Offer, Ortigas & Company Limited Partnership Head, Corporate Resources Division, Ortgas & Company Limited Partnership Eleanor C. Trumata (seconded by virtue of the Management Agreement between OCLP and CAC) 31 years oid Filipino Posttions and offices held for the present and past five (5) years ‘Accounting Manager, Concrete Aggregates Corporation Treasuty Officer, Ortigas & Company Limited Partnership The company’s business Is not dependent on the services of certain personnel ‘Consequently, no special arrangement to ensure that any person will stay is necessary. Family Relationships Family reletionships among the Board of Directors are as follows: Atty. {gnaco R. Ortigas, Mr, Jaime M, Ortigas and Mr. Francisco M. Ortigas II are cousins. Mr. Rafael 8. Ortigas is the nephew of Atty. Ignacio R. Ortigas, white Atty, Ma. Victoria B, Ortigas is the daughter of Mr. Francisco M. Ortigas IIL Involvement in Certain Legal Proceedinas ‘The above directors and executive officers had no involvement in any legal proceedings for the last five (5) years. No director declined to stand for re-election to the Board of Diractors since the date of the last annual meeting, Compensation of Directors and Executive Officers Jn view of the continuing economic crisis, the directors of the registrant recelved a negligible amount by way of per diem allowance for each board meeting scheduled, A regular Board meeting is scheduled once a month, and each cirector receives a token sum of 7,500.00 pat regular meeting, oF 2 total of yearly sum of 790,000.00 each, or a negligible sum of #990,000.00 per year for all the ditectors as a group for the regular meetings attended. In adcition, each director receives 2 P5,000.00 per diem alloviance for each board committee meeting attended, Committee meetings are held in accordance with the specific committee charters with additional meetings neic as needed. None of the incumbent diractors of the company serve in any ther capadity whether {as consultant or otherwise. Nelther is there any contract, employment or compensatory plan between the company and any director or named executive officer, For the executive officers such as the Chairman of the Board, President, Vice President, Corporate Secretary, and Treasurer, there s absolutely no compensation given for ‘whatever service they provide fo the company. a‘A.10,5% bonus Is given based on net income after tax and after such bonus in case the company eerns a profit (5.5% to directors and §.0% to management and empleyees}. Herein below is the disclosure of the compensation received by the company’s senior management for the last three (3) fiscal years, to we: ‘Summary Compensation Table Annual Compensation for year 2004 ther Annual jsation ‘Salty Aogregate | Conus (agreante Particulars Bey aie Key management personnel | (2,573,537 | 643,384 Ail officats and directors (per / T - | diem allawance only) a | group unarmed 4,605,318 300,256 Annual Compensation for year 2005 ] Particulars Tay (Agorepate | Bonus (aggregate | Other Annual ! nt) Amount) | Compersatan_ Key management personnal | 2,653,553, 968,384 Ail officeis and directors (per diem allowance only) a5 4 = cua unared 5,810,914 1,164,739 | | | Annual Compensation for year 2006 ] Selary (Aggregate | Bonus (Aggregate | Other Annual eeu ‘Amount Amount) Compensation key management personne! 4713,820 972,387 s Alofeers and dredos | | (er diem allowance only) 2,082,725 830,539 | - asa group unrames | Estimated Annual Compensation for year 2007 | parhcuare | SHBRY garagate Bonus (Aggregate | Other Annual] = Amount) Amount) ‘Compensation _ Key management personne! 5,966,000 1,144,000 :‘The following benefits apply to key management personnel: Benefit Criteria Trainings and eeminars 70,000 per senior manager and 50,000 pe manader Financial assistance Equivalent to one month salary - given only if Fnanci a condition warrants, : | Vocation and sick Teaves Equivalent to 15 days for vacation leaves and another 15 days for sick leaves, convertible to cash per year “Birthday (eave ‘One day with pay Bereavernent leave “Three days with pay | [Medicines —__[P3,500 per per - | Rice subsidy ‘One sack of rice per month Health insur (0 coverage _ Life and accident insurance 2.5 milion coverage per senior manager and PI ger _ ian per [pacer ance 00 coverage per Serior manager end 300,000 per eae — — a __ — —— eivernent bones quWvaent to te folowing + 10 — 15 years = 50% of rate + over 15 years = 70% of rate + over 20 years or employee over 50 years old = 115% of fate Compensation of Directors Members of Board of Directors are entitled to @ nominal per ciem allowance for every requiar Board meeting and Board committee meeting attended, plus a yearly Management Bonus, The amount of the same shall be determined based on the company’s net profit, if any. Certain Relationships and Related Transactions “There existed no transactions, actual or proposed, in which the company and any of its directors, executive officers, nominess for election as cirectors, security hokder end thelr relatives to the Second dvil Gegree by consanguinity or affinity, were parties for the last two years, ocuri | own: Tame of Beneficial Owner No.of sof Teleot Manes actress 7 nCotonanp | Cieonchip | Shares Cass | . with Record Hels Owner Class ‘Ortloas RCo. Lid | Ortigas & Co. Lid. Filipino 21,007,594 | 76.46. vetand — Part. 9 Mr, Ortigas Partnersho, | “pe Bldg, Ortges Ave, | same erty Pasig City - = Tae Haren Pasties, | SoneTewon | Ripe | 230939 | 841 | sar | tempie Drive," | | | Sezrmentons | Quezon City.“The voting power of Ortigas & Co., Limited Partnership (“OCLP”) in CAC is exercised by Atty, Ignacio R. Ortigas, who is a Director of CAC, 23 well as 2 General Partner of OCLP. CCLt Off date for the determination of the above is December 31, 2006. ‘Security Ownership Management 2. Board of Directors “mount of % oF Glass Name of Beneficial Owner | Beneficial Citizenship | Class ‘ownership _| | Chass | Origas, Frondsco MM. Drecto, 53,085 | Flipin | Regligble I | President), = GessA_| Ortigas, nado R, (Chairmon ofthe 3602 | Filipina | Neale |__| Boars) — | | ____| GhszA | Rodngues, Jose IVC. (Director, 319) Flipina | Negiiible “reasurer) | | “Gass A | Ortigas, lame Ry 100_| Briar National |” Negligible Chass 8 | Reyes, Geners 10] Filipino abe | Clase 8 317 Flirina negigie [case Fina ne gigi [class a” | Ortigo nest 63) Filipino | ealgble Class A | Orikas, Ma, Vietona 8. (Director, 1007 Flipina | Negliaite “| cexporate Secretory) L Cass A_| Ree €. Orion it 3 Flpna | Reaigibe la 01 Fitpina | Neatigile ‘lass A = 01) Flipina | Negligible “Toul is Negigible “served as cirector until June 29, 2006 Cut off date for the determination of the above is December 31, 2005. All_other members aside from those cited above (General Manager, Asstant Corporate Secretary) do not hold any shares in the company. “The voting powers of OCLP reside with the duly authorized person (usually one of its General Partners), who is designated to attend the Annual Stockholders’ Meeting of CAC. Voting Trust Holders of 5% or more No portion of the outstanding capital stock, whether under Class A or Class B shares, has been the subject of a voting trust agreement or any sinilar agreement. Changes in Control ‘No charige in the centro ofthe company has occured since the beginning of the last fiscal year. PART IV— CORPORATE GOVERNANCE Evaluation System in terms of Compliance with Registrant's Manual on Corporate Governance. The company has adopted the Self-rating Form issued by theSecurities and Exchange Commission, to measure the extent and niature of compliance with the company’s owa Manual on Corporate Governance. Since compliance with the requirements of the Manual and the Code of Corporate Governance Is stil Deing effected, the ‘company deemed it best to adopt the self-rating citeria/quidelines set as these reflect the ‘objectives of good corporate govemance. Measures for full compliance with the adopted leading practices on good corporate governance. Semvnars and trainings were the first tem in the pian towards full compliance Wht the mandates of good corporate govemance. Thereafter, Board Committaes ‘were established to perform their respective roles as envisioned by the companys Manu. Risk assessment and management, and effective internal control moritored by the company’s own Interal auditor, were then included in the agenda and corporate objectives. Moreover, adherence to the principles of good corporate governance and the best practices were encouraged, first among the members of the Board of Diractors, and cascaded down to the top and micdle management, dovin to the rank-and-e. The fact that the company is also certified 150 9001:2000 compliant has helped the company ta slowly but surely achieve Complete sef-dicipline and documentation, Deviations. Wo significant deviation has occurred from the company’s Manual on Corporate Governance, However, the company received a written reprimand dated October 25, 2006 from the SEC regarcing a compliance Issue relating to SRC Rule 23, In respect of independent director, Samson C. Lazo. Improvement of Corporate Governance. Plans to improve the company’s corporate governance consist of continuous seminars and treinings, as well as monitoring the performance of key officers and employees. Exhibit and Reports on SEC Form 17-C “The following reports on SEC Form 17-C were also filed during the last stemonth period of 2006 (July ~ December 2006): a. Highlights of the Annual Stockholders’ Meeting and of the Organizational Meeting of te Board of Directors ~ SEC Form 17-C filed July 04, 2006 b. Amended Highlights of the Annual Stockholders’ Meeting and of the Organizational Board Meeting of Concrete Aggregates ~ SEC Form 17-€ fled July 07, 2006 Cc. Amended Highlights of the Annual Stockholders’ Meeting end of the Organizational Board Meeting of Concrete Aggregates - SEC Form 17-C fled July 27, 2006 G. Announcement of the Replacement of the Corporate Information Officers of Concrete ‘Aggregates Corperation ~ SEC Form 17-C fied August 25, 2006 . Announcement of the Resignation of Mr, Wemer G.N, Manning as a Director and Vice-President of Concrete Aggregates Corporation ~ SEC Form 17-C fled December 15, 2006 f. Cettifcation of Directors’ Fuifilment of the Required Number of Attendance — SEC Form 17-C filed December 27, 2006 g. Independent Directors’ Certification of Qualifications ~ SEC Form 17-C fled December 2, 2006,SIGNATURES Pursuant to the requirements of Section 17 of the Securities Regulation Code and Section 141 of the Corporation Code, this Annual Report is signed on behalf of Concrete Aggregates Corporation by the undersigned, hereunto duly authorized, in Pasig City on Aprit_, 2007. Soy /O Ignacio R. son Chairman, Board of Directors (Principal Executive Officer) Emmantel A. Rapadas "Eleanor 8. Trumata ~~ General Manager Accounting Manager (Principal Operating Officer) (Principal Finance and Accounting Officer and exercising Comptrollership functions) MiP ne — Michael David I. Abundo IIT Assistant Corporate Secretary (in the absence of the Corporate Secretary) AP. 1 6 2007 : SUBSCRIBED AND SWORN to before me this —_ day of January 2007, affients exhibiting to me their respective Community Tax Certificates, as iow: Name CTC No, Date/Place of Issue Ignacio R. Ortigas 18197089 Merch 01, 2007; Pasig City Francisco M. Ortigas IIT 18133235 Janvary 18, 2007; Pasig City Emmenuel A, Rapadas 18161019 February 02, 2007; Pasig City Eleanor B. Trumata 18466247 March 6, 2007, Binan, Laguna Michael David T. Abundo IIT 18165691 February 05, 2007; Pasig City Doc.No, $53; Page No. Book No. a; Series of 2007. HAN" MANDAL ETON BLL 10, 43175ANNEX 68.1-K” Balance Sheet 3. Other Current Assets ‘The components of the company's ether current aszets are as follows: = 2006 2005 7 = +H — 596,931 | 983,192 ithhoding tax OT aa39856 | Tnput Tax ~Spare parts/Supples 832,772 1,669,336 Input Tax - Services | 4,029,558 41,342,150, Input Tax | 723,817 | ,162,850) TOTAL 7,322,334 | P2,641,82) 8. Trade and Other Payables (iv) Accrued Expenses. “The components of the company’s Accrued Expenses are as folows: - 2008 ~ 2005 ton Cost 13,747,567 | 910,988,564 a ae ae Equipment Rental - Operations 3,010,052, _1,274,57 Payroll 2,010,227 2,080 “Taxes and licenses |__ 4,982,317 9,391,553 | ‘Loading & Hauicg Charges 1,789,737 5,677,280 | necrual for Aucit Fees 713,345 236,00 Vacation and sick leave Withdrawals from MATCOR 639,235, 978,129 250,000 Sedatcast 121,607 888,485. 7 = Se — ae (ee dieeenlioen in| io Adcitional Deficiency Tax Liability 1,578,694 ip Sal Long _ = if 810,880 liierecand aie! inancing charges _ Security Services — Angono “| 7 Bonus - 230,075 Repairs and Maintenance - 100,000 | Banik oe 7 = 0059 __ 93,865 7,673,770 231,700,355 | Bi6,24,656 |"ANNEX 68,1-L” Income Statement Sales 2086 05 08 “san| vetume | Amount | voiew | aroun | voure | Anau GEA, | asnase| wa2.sssca| cise] wo7aioane | 2x0 | esas GEE agas90| ezarzaco| siozs| wow | s7o6is| 175130201 GEE asau2] seaensaa| isiasz| sranaze| tweai7| 391010 SOARS (213,847 51,453,879 | 200,901 37,110,271 | 222,754| 28,581,484 SAND (5-1) : : ‘ ilps pes RY SAND ; - ")anase| 120205 ASE Gamse- | 75905| s32q426| ors: rasan) sazis| 1651286 : GOR 5 HCO | yon] _ueasee| sa azvoaiy| sya) 27isn000 BOULDERS 1,785 228,592 = = “OF oH essi] sszees| nore] some) 590] yan Tae ayose ab | wab7,on0 666 [LTS [FHTSTaR O07 |b aTR GST BI, “annex 8.6" ScneDuiEs Schedule B Amounts Receivable from Directors, Officers, Employees, Related Partios and Principal Stockholders (Other than Related Parties) ‘Aawvances to Officers and Employees Indebtedness exceeding ®100,000.00 ‘Aguinaldo, Rogel Armancl, Artinde Cruz, Nelta Galang, Corazon Gelecio, Elpidio Macaspac, Antonio Montoya, Romeo Pascual, Teody Pilon, Luz Rea, Dario Viscayno, Cyril Others Alloviance for doubtful accour ‘Advences to Officers and Employees-net 2006 2005, 2004 = 196,379 - P115,698 - - = 698,252 278,373, 126,785 = 283,235 420,040 123,693 - : = 234,846 169,745 - - 237,224 104,369 - = 124,708 - = 441/522 - 248,909 - - 4,245,191 2,283,355 1,469,306 1,123,738) 1,170) 1,129,834 3,221,108 2,265,760Due from CAC Insurance Agency Corporation = = 361,363 Total Receivable from Officers, Employees and Related Parties 1,129,634 3,221,108 7,627,623 Schedule ¢ Non-Marketable Equity Securities, Other Long Term Investments in Stocks, and Other Investments “This account consists of investments in shares of stocks of wholly owned subsidiaries accounted for under equity mettiod. However, since these investments remained non-performing since 1999, these were reclassified 1 other nor-current assets in year 2005, ‘The detalls of this account are summarized as follows: Investment in Stocks reclassified to Other Non-Current Assets: E 2008] 2005 | 2004 LAC insurance Agency Corporation 161,237| _P159,714, _0950,000 ‘CAC Marketing and Services Corporation| _4,470,348| 2,052,974] 1,125,000 TOTAL 1/631,585) 2,212,580] 61,375,000 Investment Properties ‘A reconciliation of the carrying amounts of Investment property at the beginning and ‘end of the year is shown beow: For the Year Ended December 31, 2006 Lard gel aneg Bung Total Tegan EE Colne Suorce 68,805,991 was.z02640 22,442,531 106,454,162 fears ean tins Ba ceaie 981 TeaaR EW 2a591 108 A542 eamel Crean Beginning Balance 9,038,480 16,079,819 25,118,299 Provisions for the year = 4384352 1,426,244 2,810,596 Ending Balance 10,422,832 17,506,063 27,928,895 Carrying Amount: Baginning Balance 68,805,991 86,164,160 6,362,712 _FB1,332,863, Ending Balance R6E,805,991 R4,779,808 24,936,468 P78,522,267 For the Year Ended December 31, 2005 land bod improvements Baling Total Acquisition Cost: Beginning Balance R68.805,991 14,450,540 22,442,531 LOS, 699,062 Adcitions - 752,100 = 752,190. Encing Balance 66805,581 “15,202,640 22,442,531 106,451,167 ‘AccumulatedDepreciation: Beginning balance = 7,085,954 12,355,163 29,041,627 Provisions for the year = 1,353,016 3,723, 72 Ending Balance = 9,038,480 (16,079,819 25,118,209 Carrying Amount: Beginning Balance P68,805,091 86,765,076 __ 10,086,368 __F85,557,435 Encing Balance 68,805,001 6,164,160 ___F6,362,712 PBL, 332,963 In 2004, the company sold 2 parcel of land located in Cebu with a cost of 83,217,376 for 25,736,276, net of selling exoenses, and resulted to a gain of F22,518,900, Certain’ parcels of land with carrying value of P1,363,178 as of December 31, 2006 are mortgaged as collateral to secure the company’s bank loans, Certain parcels of land (classified as property, plant and equipment and investment properties) acquired up to July 5, 1996 with total camying value of 127,300,219 as of December 31, 2006 were appraised in 2003 by an independent firm of appraisers. The appreised velue of these parce's of land amounted to P21 billon as ofthe date of appraisal Schedule D Indebtedness of Unconsolidated Subsidiaries and Related Parties Indebtedness to the company of its wholly owned subsidaries and related parties were already consolidated to the financial statements of the parent company in year 2006 and these are as follows: 2006 2005 2004 ‘Due from CAC Insurance Agency Corporation 361,683, Total Indebtedness of Unconsolidatad = 6361, 683 Subsiciary edul Indebtedness to Related Parties 2005 2004 Demo — : - Due to CAC Marketing and Services 3,297,069 2,010,000 2,010,000 Corporation Due to CAC insurance 192,779 > = Total Indebtedness to Related Parties 10,970,029 F2,010,000 2,010,000 ‘Schedule I Capital Stock ‘The details of authorized and paid-up capital stock are as follows: Authorized Paid-up fiomber oF Number of Outstanding shares Amount ‘Shares AmountComion Class “A” at P10 per value each 40,000,000 400,000,000 22,077,771 920,777,710 Common Gass "8" at P10 par value each 10,000,000 100,000,000 5,388,678 53,886,780 50,000,000 8550,000,00027,466,449 8274, 664,490 Class "A" and Class "8" common shares have the same rights and privileges. Class "A" common shares shell be Issued solely to Filipino citizens, while Cass "B” common sheres may be issued to Filipino and non- Other Required Disclosures Related Party Transactions 2006 2005 2004 = 7361, 863 37,480,181 = vation 3,297,069 62,910,000 2,010,000 — 192,79 = a. On January 24, 2006, the company entered into a management agreement with its Majonty stockholder, OCLP, Under the terms of the agreement, the company shall pay OCLP a monthly fee of 700,000 from commencement of the agreement up to December 31, 2005, subject to an annial escalation fee of 5% or the average inflation rate for the immediately preceding yeer, whichever is higher, plus an additional {ee of 5% of Incremental audited net income after tax, starting on January 1, 2006 with the 2005 audited net income as base year. OCLP welved the company’s payinent of manaernent fee for the first two months of the implementation of the contract. Total management fee Fecognized in 2006 amounted to #9.0 milion. The outstanding balance due to OCLP amounted to P7.5 million as of December 31, 2006. b. The company also leases from OCL? its office and a parking space in Ortiges Bulling, Ortigas Avenue, Pasig City, The lease contract 6 for a period of two years, renewable annually, Total amount of rental end parking charges recognized as expense amounted to 412,212 jn 2006. The company has no outstancing liability related to ths contract as of December 31, 2006 and 2005. . The Group has an ongoing banking relationship with a related party. The tatal cash in bank maintained with the related party amounted to P1,904,958 and R49,871 as of December 31, 2005 and 2005, respectively. d. The compensation of key management personnel of the Group amounted to 5,186,187, #3,621,937 and P3,216,921 for the years ended December 31, 2008, 2005 and 2004, respectively.